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Did the bailout increase market volatility?

October 28, 2008 by  

The stock market was unsettled after the bailoutPresident Bush and Congress may have attempted to quell the volatility of the stock market by approving the $700 billion bank bailout, but some experts are suggesting the move has had the opposite effect.

A report on Newsmax raises concerns about how the rescue package and related measures have affected issues of value and risk.

"Now that deposits are guaranteed, basically I as an investor have no incentive to hold equities, so I sell them and put my money in bank deposits," financial author Marc Faber explained to CNBC, according to the news provider.

He claimed that government interventions have made it "impossible to forecast market movements."

And Chris Whalen of Institutional Risk Analytics suggested in a recent newsletter that the bailout has led to a situation in which price and value are no longer linked and investors have lost confidence.

"No wonder the entire stock market is having an extended nervous breakdown," he added.

Meanwhile, ABC News reports that despite the current financial uncertainty on Wall Street and the bailout, many CEOs and senior-level executives will still receive higher-than-expected bonuses this year.
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